The importance of financial resiliency for the life sciences industry
Legislative changes, such as the US Inflation Reduction Act (IRA), have constrained the ability of life sciences companies to improve margins through pricing adjustments. Instead, life sciences companies may need to focus on cost control and capital efficiency strategies to achieve better outcomes and ultimately safeguard their financial health.
Financial resiliency is an organization’s ability to achieve long-term growth and adapt quickly to changing market conditions and disruptions. It plays a significant role in ensuring the sustainability and success of life sciences companies in the face of evolving challenges.
Why focus on resiliency now?
Today, CEOs in the life sciences industry are facing more immense macro-economic headwinds than at any other recent time. More than half of the life sciences CEOs surveyed in our CEO Outlook report published earlier this year expressed expectations of a persistent downturn.
Adding to their concerns are financial and operational pressures, including high cost of capital; new pricing regulations; and rising manufacturing costs, including energy, transport, labor, raw materials and active pharmaceutical ingredients (API). In addition, life sciences companies are wrestling with the need to invest in new innovative technologies that will require more capital investment, such as cell and gene therapies.
Given these challenges, it is crucial for companies to act now and take a proactive and comprehensive approach to improve margins, maximize cash flow and achieve financial resiliency across multiple fronts.